Klarna, a prominent figure in the Buy Now Pay Later (BNPL) industry, has recently unveiled the introduction of late payment charges for all of its clients, including young individuals who heavily depend on BNPL purchases to sustain their lifestyles.
The new charges will impact customers who select regulated financial products, including larger and more costly purchases with extended repayment periods of up to 36 months. This encompasses a wide array of products such as mobile phones, washing machines, electronics, and furniture.
Commencing on June 20, customers will face a £5 late payment charge for any missed payment of £20 or more, with the charge being reduced to 25 percent of the installment amount if it is less than £20. Klarna has stressed that customers will be provided with a grace period of 14 days to make each planned payment before the penalty charge is applied.
In an official statement, Klarna declared that these modifications are intended to align their regulated financing product with their interest-free BNPL products, and to safeguard that late fees serve as a signal for customers to remain on top of payments without becoming a burden.
This decision comes at a time when BNPL services have rapidly gained popularity, surpassing traditional payday loans and making headway on credit cards. According to a report from lending technology firm Lenvi, 40 percent of individuals have utilized BNPL in the last five years, with the highest usage among those under 44 and 18-24 year olds.
However, concerns have been voiced regarding the potential adverse impacts of BNPL, particularly in terms of repayment management and the risk of accumulating multiple loans simultaneously. Sebrina McCullough, director of external relations at Money Wellness, emphasized the ease of spending with BNPL and the potential impact on mental health, especially for those who feel persistently pursued for BNPL debt.
Additionally, with the increasing demand for lifestyle lending, encompassing areas such as ‘Botox borrowing’ and ‘influ-lending’ promoted by social media personalities, there is an urgent necessity for regulation and protection to prevent individuals from falling into a cycle of debt.
As more and more young adults turn to BNPL services to fund their purchases, it is imperative for companies like Klarna to uphold responsible lending practices and safeguard their customers from the adverse effects of debt accumulation. The introduction of late payment charges is a step in this direction, but it also underscores the need for individuals to exercise caution and financial responsibility when utilizing BNPL services.